NLRB Could Ease Unionization of Franchisees

Fast food chains would be particularly vulnerable to rule change

Protesters outside a McDonald's / AP
June 18, 2014

Obama’s top labor appointees could craft yet another rule that would ease backdoor unionization, according to critics.

The National Labor Relations Board (NLRB), a federal labor arbiter, is reviewing a regional judge’s decision about joint employment among subcontractors in Browning Ferris v. Teamsters Local 350. The review could allow unions a seat at the corporate table through subcontractors or franchisees, according to Glenn Spencer of the Workforce Freedom Initiative.

"The board is using this as an opportunity to potentially change the joint employer standard," Spencer said in an interview with the Washington Free Beacon. "Under existing standard you have longstanding models of doing business whether as franchisees or third party contracts, because it enables companies to be flexible, to allow entrepreneurs to begin businesses."

Companies such as McDonald’s and Subway charge fees to operate under a corporate umbrella, but an individual entrepreneur controls the business itself. Changing the third party standard would allow unions to organize employees at one subcontractor or franchisee and then demand a seat at the table of parent companies.

"If the board undermines this standard, the parties that benefit are worker centers and unions who are then able to organize large swaths of employees of companies beyond one franchisee," Spencer said. "Ultimately what the union wants is to force parent companies to neutrality agreements so they can pick off one franchise after another."

David Phippen, a management-side labor attorney at Constangy, Brooks & Smith, said that any change to the joint employer standard could ease unionization efforts. Large corporate entities could see a domino effect in which the actions of a small group of employees open the doors to unionization among millions of workers under the corporate umbrella.

"If the NLRB current majority changes the existing joint employer standard, or even begins to apply it differently, that could enable unions to more easily ‘capture’ within their organizing efforts more entities further up the business food chain and then apply recognition and/or bargaining leverage to the larger-entity targets," Phippen said in an interview with the Free Beacon. "Larger entity targets sometimes tend to be less nimble, to have deeper pockets with money labor wants, and to be more susceptible to corporate campaigns."

Businesses are unlikely to acquiesce to union control over employees, Phippen said, noting that if the odds are stacked against them in the NLRB, many will change their business models. Fast food workers, for example, could be replaced with burger-flipping machines, he said.

"Any new standard would be yet again another type of artificial government intrusion into the business market that might cause businesses to make choices not based on true market factors," he said. "It is probably not reasonable to assume business will simply stand still and keep business organizational structures in order to ‘weather a siege’ because the NLRB wants operations within labor's realm."

If the NLRB standards are altered it could benefit Fast Food Forward and other labor-backed front groups that have campaigned at restaurant chains for pay that is double the federal minimum wage.

"Unions that are bankrolling worker centers are hoping that a decision will upset the franchise model," Spencer said. "They could use this to direct the larger parent companies to the bargaining table while only organizing a small portion of workers."

However, those union gains could have costs. New rules for subcontractors and franchisees might lead to reduced employment as companies scale down franchising or abandon it altogether. Phippen said workers would suffer more under the labor standards than entrepreneurs, who are better able to withstand vast changes to labor relations and economics.

"In the longer term, the business entities' responses might hurt the very employees the proponents of a new standard claim to want to help," Phippen said. "One can easily understand why industrial engineers somewhere might be looking at robots for the sorting work and/or looking at the cost of shipping the recycling materials elsewhere for sorting. Then joint employment might be a non-issue—much of the employment would be gone."       


Published under: NLRB , Unions